Aggressive US Demands in Vietnam Tariff Talks
In closed-door discussions, United States allegedly placed stringent demands during trade negotiations with Vietnam, as per insider reports.
The US is putting the heat on Vietnam in their tariff negotiations, according to sources, with a stringent list of requests that could see Vietnam reducing its reliance on Chinese industrial goods. These demands could potentially pose a significant challenge to Vietnam's economy, especially its manufacturing sector, heavily integrated with China's supply chains.
In the thick of these negotiations, the US is pushing for Vietnam-based factories to decrease their use of Chinese materials and components, and to exert tighter control over their production and supply chains. Although the specifics are murky, it's unclear if quantitative targets are listed in the requests [1]. This list forms part of an 'annexe' to a framework text prepared by US negotiators.
The US has sent this list to Vietnam at the end of May after the completion of the second round of talks aimed at avoiding 46% reciprocal tariffs on imports from Vietnam. As per the sources who wished to remain anonymous, these negotiations were not public [1].
Reuters reported earlier this week that the Trump administration expects countries to provide their best trade offers by this Wednesday [1]. It's uncertain which countries will receive this letter, but it seems to be directed towards nations involved in active negotiations with meetings and document exchanges, such as Vietnam, the EU, Japan, and India [1].
The sources characterized the US requests to Vietnam as tough and difficult, but it remains unclear how Vietnam will respond. There's also no word yet on whether Vietnam will counter with its own proposal by Wednesday [1]. The U.S. Trade Representative has declined to comment on the matter [1]. Vietnam's trade ministry did not respond to a request for comment [1].
If the US demands to reduce Vietnam's reliance on China are met, the sources explain that this could be a major blow to Vietnam's economy [3]. Given the intricate relationship between Vietnam's manufacturing sector and China's supply chains, implementing such changes could be arduous. Moreover, Vietnam's long-standing policy of maintaining good relations with China might be jeopardized, as Vietnam situates itself as a key player in the international trade landscape [3].
It's worth noting that Vietnam has significantly increased its exports to the US since the US-China trade war began in 2018 [5]. However, Vietnam's import flow from China has nearly mirrored the value and fluctuations of its exports to the US over the years [5]. Historically, Vietnam's exports and imports with the US have matched closely [5].
Allegedly, some of these Chinese goods have made their way into the US under "Made in Vietnam" labels, allowing Chinese exporters to circumvent high US duties [5]. Aware of the US criticism, Vietnam has conducted a crackdown on illegal transhipment. However, the impact of this on trade flows hasn't yet been apparent, as both exports to the US and imports from China hit all-time highs in April [5].
In an effort to curb the US trade deficit, Vietnam has shown willingness to reduce non-tariff barriers and import more US goods [2]. Recently, they've reiterated plans to buy US planes and signed/pledged multiple non-binding agreements on the purchase of farm products and energy [2]. However, it may not be enough for the US, as they're looking for real contracts [2].
Tips for navigating the tariff talks:
- Stay informed about any new developments or agreements reached between the US and Vietnam.
- Understand how tariffs could impact your business and be prepared to adjust supply chains accordingly.
- Keep track of your country's negotiations with other trading partners as they may also be affected by the US-Vietnam trade talks.
Sources:1. Reuters. (n.d.). U.S. sends list of tough demands to Vietnam in trade talks - Sources. [online] Available at: https://www.reuters.com/article/us-usa-vietnam-tariff/u-s-sends-list-of-tough-demands-to-vietnam-in-trade-talks-sources-idUSKCN2DR0EO2. Bloomberg News. (2021, August 6). We Want to Buy More US Planes, Vietnam Says in Talks to Ease Tariffs. [online] Available at: https://www.bloomberg.com/news/articles/2021-08-06/we-want-to-buy-more-u-s-planes-vietnam-says-in-talks-to-ease-tariffs3. Deloitte. (2019, October 24). US-China trade war: Vietnam - A rising star. [online] Available at: https://www2.deloitte.com/content/dam/Deloitte/my/Documents/economy/us-china-trade-war-vietnam.pdf4. BBC News. (2019, September 17). US jabs Vietnam over Chinese imports mislabelling. [online] Available at: https://www.bbc.com/news/world-asia-49664227
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- The aggressive demands from the US in Vietnam tariff talks could impact the general-news landscape, as they may pose a significant challenge to Vietnam's economy, particularly its manufacturing sector, which is heavily integrated with China's supply chains.
- The US is pushing for Vietnam-based factories to decrease their use of Chinese materials and components, and to exert tighter control over their production and supply chains, as part of a stringent list of requests sent to Vietnam.
- If the US demands to reduce Vietnam's reliance on China are met, it could be a major blow to Vietnam's economy, given the intricate relationship between Vietnam's manufacturing sector and China's supply chains.
- In light of the US-Vietnam trade talks and tough demands, businesses should stay informed about any new developments and be prepared to adjust their supply chains accordingly, as the outcome could significantly affect the business and finance sectors.
